Lenders now want up to 15% to hold CoreWeave's unsecured debt, turning the AI cloud company into the test case for how much borrowing the AI boom can carry.
CoreWeave, a company that rents out Nvidia AI chips, saw its stock drop more than 15% in one day this week after yields on its unsecured bonds touched 15%. Its credit default swaps, a form of insurance against non-payment, hit a record level that prices in a better than 60% chance of default within five years.
The worry is debt. CoreWeave owed about $30 billion in June, three times a year earlier, and plans to spend up to $35 billion this year. Elon Musk summed up the mood in one word: "Yikes."
CoreWeave, one of the biggest companies renting out AI computing power, just became Wall Street’s favorite worry. Its unsecured bonds touched a 15% yield this week and its stock fell more than 15% in a single day, before bouncing back 6% the next.
Why should anyone outside a trading floor care? CoreWeave rents out the Nvidia chips that train and run many AI tools. If lending to companies like it gets expensive, building AI gets expensive too. And this time the alarm started in the bond market, not the stock market.
CoreWeave stock is falling because lenders are asking for much higher returns to hold its debt. A bond yield of 15% on unsecured debt, meaning loans with no collateral behind them, tells you investors see real risk of not getting paid back.
Credit default swaps, a kind of insurance against a company failing to pay its debts, tell the same story. CoreWeave’s five-year swaps rose by as much as 74.5 basis points to 1,194.5 on Thursday, the highest intraday level on record, according to ICE Data Services. That price implies a better than 60% chance of default within five years. In June, the same contracts sat at 452.
The scale of borrowing is the core issue. CoreWeave had about $30 billion in total debt in June, roughly three times the level a year earlier, with a speculative-grade credit rating. It plans to spend $31 billion to $35 billion on equipment and buildings in 2026.
Investor Chamath Palihapitiya shared the 15% yield while arguing that the AI build-out may be creating a bubble in private lending. Elon Musk replied with one word: “Yikes.”
The selling spread to similar names. On the day CoreWeave dropped 10% in morning trading to $70.37, Nebius fell 6% to $194.79 and Oracle slipped 2% to $139.69. The wider Nasdaq-tracking QQQ fund lost only 0.7%, which shows how narrowly the fear was aimed at AI cloud companies.
Nvidia is both CoreWeave’s supplier and one of its biggest owners, with a stake of about 10%. It added another $2 billion investment in January. Speaking at a Bloomberg event in Stockholm on Thursday, CEO Jensen Huang pushed back hard.
“CoreWeave’s strength is improving every day,” Huang said. “I’m optimistic. Their cost of capital is actually decreasing.” He added that Nvidia has no need to backstop the company.
Critics point to circularity. Nvidia invests in, or guarantees debt for, customers who then spend that money on Nvidia hardware, which they say can make demand look bigger than it is. Huang has called that idea “ridiculous,” while the International Monetary Fund and the Bank for International Settlements have flagged it as a risk to the wider financial system. Separately, Nvidia is reported to be in talks to back $250 billion of OpenAI’s data center financing, which neither company has confirmed.
For everyday AI users, nothing changes overnight. Chatbots and image tools keep running. The real question is cost: if the companies building data centers pay more to borrow, that pressure can show up in how fast new AI services arrive and what they charge.
For people holding tech stocks, it is a reminder that the AI boom is partly funded with debt. Not everyone is alarmed. Cantor Fitzgerald called the criticism “a lot of fearmongering” and kept a $176 price target, saying CoreWeave has sold nearly all its capacity coming online in 2027. Bank of America kept a Buy rating with a $140 target, and Deutsche Bank kept a Buy with a $150 target.
CoreWeave CEO Mike Intrator reportedly told staff the selloff was irrational. Its signed backlog of future contracts stood at $99.4 billion in July, and one more recent estimate puts it at $104 billion.
CoreWeave is a cloud company that rents out large numbers of Nvidia AI chips to businesses that train and run AI models.
He was replying to a post by investor Chamath Palihapitiya highlighting the 15% yield on CoreWeave’s unsecured bonds as a sign of a possible AI lending bubble.
Huang says Nvidia does not need to backstop CoreWeave. Cantor Fitzgerald says Nvidia has an agreement to cover any unsold capacity.
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